Just this past March I wrote a piece focusing on the unlikely but similarly star-crossed paths of Blockbuster and Best Buy. While I did not foresee the same near-term fates for the two, I noted that as Best Buy’s future remained uncertain at best, Blockbuster’s demise seemed a lot closer if not imminent. I attributed a good deal of Blockbuster’s game-breaking problems to the continuous challenges posed by the fledgling Netflix and its ability to stay ahead of its own developing technological challenges as well as those posed by Blockbuster’s behind-the-curve struggles.
I finished the piece with a quasi-statistical comparison between Blockbuster and Netflix. Blockbuster’s stock had been delisted while Netflix stock had just soared to a historical high of $220. More incisive was the fact that Netflix stock had risen more than ten dollars over the few days prior to the report and had reached its then current peak from a low of just over $70 from a year prior.
I am sure much of our media-laden society has been reading and hearing about the recent and all too controversial price changes Netflix imposed on what the company seems to have essentially turned into an angry and resistant customer base. As a result, Netflix began seeing a movement to rapidly cancel subscriptions.
As contentious as the subscription price increases were, especially at a time where much of our elected government officialdom is trying to create jobs enhancing legislation to avoid a frightening second dip in the recession, the CEO of Netflix had the temerity to heighten the controversy by attempting to explain away his inflationary moves by blaming his communications skills rather than the bumbling consequences of the increase itself.
To make matters worse, which didn’t seem possible, he announced a series of further changes which were not only deemed rushed and radical but also brought about a storm of disbelief and indignation from remaining and potential subscribers, as well as industry observers. These moves also served to further the journey south of the company’s recently rapidly declining stock price, down to less than $130.
These events so inspired my curiosity that I just had to Google Netflix to check a few facts. I first came to the corporate website where I was surprised to notice that the only offerings seemed to be for the company’s direct streaming service. There seemed to be no mention of its more popular and in-depth DVD by mail service which had built the company into a Wall Street power.
I carefully searched the site’s main page expecting to find a reference about how to subscribe to its DVD service or a link to its new Qwikster website which is supposed to be devoted to that service. I finally noticed a seeming click-thru which was almost hidden at the bottom of the page. It asked, Can I get DVDs by mail from Netflix?” Unfortunately a click brought down an answer that was intended only for people subscribing to the streaming service who were willing to pay an additional price for an add-on.
As the Netflix website refused to allow me to search its more popular, traditional DVD service, I decided to Google the new site which the company now deems a separate necessity to properly offer its selection of DVDs. As an instinctively good speller, my first attempt to Google the site ultimately contained two spelling errors. I was surprised to note the new site began with a Qw…and added ikster. My instincts had created a double misspelling on my first attempt to locate the site. I was not surprised when a friend reported he had committed the exact same errors. On television news, a consumer wondered if the new moniker had something to do with Napster.
Worse, one friend asked, why use Qwikster as the name of a mail-to service? In this electronics-based day and age what is quick about conventional mail? It is almost as when our troubled postal service attempts to manipulate words to excuse its loss of business to email.
Googling Qwikster, I was surprised to see that the company’s new website is the third listing down the Google page. Worse, second on the list is a link to the now infamous, profanity laced Twitter account that Netflix clearly failed to notice in its haste to co-opt their new name. The owner of the account recounts the current bidding (apparently there are others seeking to drive up the price or further embarrass Netflix). He also notes that he has received over three thousand tweets just because ‘someone’ wants to buy his ‘handle’.
On actually clicking onto the Qwikster site one is confronted by a stilled, dullish screen which is filled by a photograph. At the center, a strong light shines from an old fashioned film projector through a parted theatrical curtain. At the top of the photo are the words, ‘Qwikster, a Netflix Company’. Below in smaller type, ‘Launching Soon, so start the popcorn’. There is no place for potential customers to subscribe or for any type of customer to ask questions. For a company offering nothing but videos it seems odd that their brand new website is a stagnant picture with a briefly worded attempt at humor. One would expect that this awkward situation will be cleaned up shortly.
As much resistance as there was to the company’s original headline-grabbing rate hike, the further explanations accompanied by a new and distinct second website and a cumbersome new brand have seemingly created almost as much confusion and anxiety among customers as Netflix corporate has displayed in escalating a pricing issue to a multi-pronged crisis. Customer indignation has been sharp, including complaints about now having to manage a formerly simple account across two websites.
Based on the above facts it is clear that the latest Netflix corporate changes were made in great haste. With the company’s stock falling to less than sixty percent of what it was just five months ago, it would appear to be a bargain if one believes in the quality of its corporate management. Acting in haste and creating a crisis from a rare corporate glitch must make one wonder.
Some critics already equate the scope of the latest Netflix escapade to classic corporate blunders such as the fiasco brought about by the announcement of New Coke. The results for Netflix however could be far worse. After wiping a great deal of egg off its corporate face, the people at Coca Cola were able to launch a considerable PR campaign and coin the designated for extinction original Coke as ‘Coke Classic’ and recreate it as the company’s principal product. Actually, they were giving their public what they really wanted.
Netflix essentially has one offering. Slice and dice as they may, be it DVDs vs. direct streaming or movies vs. television shows they are still entertainment rentals. While the company clearly sees direct streaming as the heart of its future, the current DVD catalog offers far more depth and thus is likely to be in play for a long time, even as more homes add devices required for streaming video. One friend, an analyst who often has Wall Street’s ear, noted that this is likely to be a classic case study, to be reviewed in university classrooms for years to come.
I began this piece with a title wondering if Netflix was missing the competition Blockbuster once provided. It is my opinion that throughout its relatively brief history, Netflix saw Blockbuster as little more than a competitive factor to consider through its early development. Netflix seemed to grow effortlessly through a fairly simple corporate mantra. Once they established an attractive and profitable pricing scale it was just a matter of technology catching up with Netflix so they could incorporate ever more sophisticated streaming services into their offerings. During the golden era of Blockbuster, Netflix seemed more cautious in its approach to the market. Clearly Netflix has not employed much caution lately.
When I wrote the March piece on Blockbuster, there wasn’t any talk of the possibility of its acquisition by Dish Network, which took place in April. Since the acquisition, the rumors of Blockbuster’s demise have proven to be just that. Dish will apparently ultimately maintain a base of at least 1,500 US Blockbuster retail locations plus a growing cadre of Blockbuster Express kiosks along with well over 2,000 locations overseas.
The company certainly has considerable potential to implement Blockbuster’s vast library and its clout with major movie studios to incorporate these elements into attractive and profitable offerings for its satellite subscriber base. Meanwhile we wonder about the competence of Netflix management. Have the tables turned?
Addendum: Just moments prior to publication of this Insight, word came out about a media conference to be hosted by Dish Network/Blockbuster this Friday. The company is expected to announce a new movie streaming service to be offered under the Blockbuster brand.
Not too coincidentally, considering the current Netflix controversy among subscribers, the price of Dish Network stock has surged fifteen percent in the last five days as Netflix shares have fallen by 30%.
Chain Store Guide’s database of Discount Stores &Specialty Retailers includes in –depth, comprehensive listings for both Netflix and Blockbuster. Our database of store locations includes Blockbuster’s domestic empire. Of course, Netflix operates exclusively through the Internet and has never operated through any brick and mortar locations.
Arthur Rosenberg, Senior Editor
Arthur has worked at Chain Store Guide for 20 years. He received a B.A. degree from City College of New York and attained a master’s degree in electronic communications from Brooklyn College. Please contact him if you have questions or comments.
Arthur has worked at Chain Store Guide for 20 years. He received a B.A. degree from City College of New York and attained a master’s degree in electronic communications from Brooklyn College. Please contact him if you have questions or comments.
